How social software could dethrone the big guys
The big IT vendors aren’t taking social software seriously. They can’t. Not even if they wanted to. They’re wedded to a massive install base and business model based on extremely profitable file-based applications. There’s no easy way out. This very thing happened ten years ago to the photography market. That’s why the ten-year stock prices below could very well be a glimpse into their future. Sounds extreme but I imagine the same was true in the late 90s when folks said that digital photography could upturn everything.
Once upon a film
Kodak had a monopoly on the film business for decades. But at the end of the 1990s, consumers finally got the chance to use something they loved: Pain-free (digital) photography. It made photography accessible, fun, and immediate. No more trips to the store for film. No more waiting to see if you got the shot. No more expensive processing and film. This huge demand made it’s way into commercial business as well. Sound familiar?
No longer relevant
Kodak dominated the imaging market for decades but their entire DNA was about film. I happen to know first hand that the company didn’t take digital seriously for a long, long time. In 2003, I had meetings with film and digital people. All of us would be in the same room and the digital people were always shoo-ed like buzzing flies. That’s even after their CEO had vowed they’d become a leader in the digital space (late in the game). I’ll spare you the details of those meetings but suffice it to say, back then it was obvious they didn’t have the people or culture to stop the digital strangling.
Radical change needed 
I’m not trying to say Microsoft will go the way of Kodak (or even Polaroid). I mean, IBM is still around and they used to rule the PC roost. Transformations happen. Apple did it. Dell’s trying to. But typically this sort of transformation is rare, expensive and born from innovation. Not something Redmond is known for. Making fundamental change requires companies to overhaul everything they do–from planning to manufacturing to marketing. It’s something Microsoft will have to do to enter into the consumer advertising market, let alone deal with their massive document dumps vs the people-centric social software movement.
The next enterprise software leaders
Canon used to be fax machines, printers and copiers. They were able to reinvent and capitalize on the digital imaging market and flip flop leadership with Kodak. Kodak is still a player but now there’s a wholly new set of competitors. The same thing will happen for enterprise software. Sure Microsoft, IBM, SAP, and Oracle will be around but there will be room, for the first time in decades, for new players to capitalize on the massive demand and emerge as leaders in a wholly shifted playing field.
Things people have said about this post
Though I like social networks - and microblogs especially - I can’t see the aspects Microsoft, IBM, SAP, and Oracle are losing upon.
Microsoft still has MSN and Live spaces so it can regain the social networking world. The restyling of MSN spaces into Live spaces hasn’t been as great; hotmail is losing domain to gmail; but MSN seems to stay put.
IBM, SAP and Oracle seems more opaque to me; are they indeed losing market share ?
Google is becoming the greatest player in the public software as a service market; Linux conquers the operating system market thanks to Ubuntu.
But I can’t see why enterprises would go the same way as users do concerning secure software. Even if to would turn to Linux, Microsoft has already acquired a Linux company and the three other companies probably have too.
I’m more afraid of newspapers, radio stations and TV studios not grasping microblog developments at this moment.
Microblogs are changing the world, permanently and drastically.
Nice analogy. It’s ironic that Microsoft finds itself in the same position that IBM was in when Bill Gates and crew did their version of David and Goliath (Big Blue). What goes around, comes around as the great philosopher Justin Timberlake likes to say.
It’s all part of the circle of life in the technology world. Constantly change and evolve or perish. Adapt or die. Yahoo’s another cautionary tale.
They’ve subscribed to the “If you can’t beat ‘em, Buy ‘em” school of thought. They knew they had a great deal of work to do if they wanted their Yahoo Photo’s to compete with that young whipper-snapper Flickr that was stealing all of their users so what did they do? Yup. They bought Flickr and ditched their inferior Yahoo Photo’s service. It’s a shame they didn’t do the same thing with social bookmarking as they’ve let Delicious die on the vine and kept their web 1.0 yahoo bookmarks alive. It makes no sense.
Regardless of how a company manages to adapt to the challenges they face (thru innovation or acquisition), the point is loud and clear: Change or become irrelevent.
Pai
Very interesting analogy. I think part of this issue too, is that the technology is not the issue anymore, it’s what it can do. Carriers and telco’s will focus more on reliable, high-speed infrastructure, IBM and Microsoft will shift to delivering services via “cloud computing” and IT departments will mostly disappear. Now, marketing, PR, IR, production, will simply have people who can configure widgets and On-The-Fly database apps. This means no more huge IT development budgets, since companies will just access cloud computing services…and hence social media is the driver behind this happening…
For the long version of this post, read “The Innovator’s Dilemma” by Clayton Christensen.
Business user demand for usable productivity applications will ultimately drive purchase decisions, but, until those in charge of making those decisions are comfy looking beyond the software Borgs of the world - who they deem as “safe bets” - users will need to be content with barely-good-enough software until the Borgs get it right in 2-5 years’ time. “Be patient. We’ll get there. Have some more gruel while you wait behind your procurement/IT/whatever dept’s imposed productivity prison bars.”
Maybe a business user revolt is in order.
Sam I disagree with you partly. I think that enterprise software companies either evolve or die - both in the USE of social media as part and parcel of their business as well as in extending their solutions to include appropriate social media capabilities. You’re right that there is a transformation underway and its not being led by the traditional enterprise software players but by online media companies like Google and smaller players. Its always been that small companies innovate faster and more radically than larger companies. But these large companies, SAP, Microsoft and Oracle aren’t going any where…per your point, they have massive installed base with massive recurring revenue streams… now they will dry up but not fast enough for these companies to develop alternative revenue sources.
My two cents
@Steve I wonder if people-centric applications can be added to existing applications. I honestly don’t have a perspective because I haven’t seen it done yet in a compelling way. I remember Kodak trying to blend their digital and film businesses and it flopped on them. For the big guys to get it, they’re going to need to reinvent vs “add on” or rely on a partner network to solve the problem. This will take many years for them to figure out and enact change. In the meantime, the landscape as it applies to productivity software, should shift in interesting ways.
As Mike Gotta said on Twitter today, “social computing/media/software + SaaS + consumerization of IT + generational shifts + (other stuff) = hit to large ent vendors.”
Everyone seems to agree that a transformation is occurring. That typically means some people won’t make it to the other side.
People Centric applications are entirely different. You are correct. But many organizations which buy from the “big vendors” don’t necessarily get that so they are content to buy an application platform that “oh by the way, does Social Networking as well”… go figure
Great post, Sam. It’s hard for businesses to reduce focus on a proven revenue model to pursue one that is yet unproven. Just as in the film industry, I think the same is true of software vendors.
Media companies also suffer from the same problem. Banner ads, for example, have proven revenue streams and CPMs. It’s hard to convince a marketing department that they’re actually eroding their brand when the very things causing erosion make the company profitable. It’s difficult for people who are entrenched in this “old school” way of thinking to grasp the broader, long-term vision (in this case, less intrusive, contextually relevant ads) that building around user experience is more economically viable.
Going to toss in my 2 cents here.
Social software in the enterprise is about workflow. The current applications being used to facilitate collaboration were not designed for the current business environment.
Current collaboration at my company goes something like: track changes on a document, save it as a new version, email it as an attachment around to people, collect any additional tracked changes and comments via email back, merge all changes into another version of the original document, rinse and repeat.
Every user is his or her own little silo because they can’t make the work they are doing visible to the internal network of people that need to be involved.
The value that I see coming out of the social software innovations are the ability to make work more visible and avoid bottlenecks in workflow processes. Those are the pain points that companies are seeing and if the smaller, more nimble software vendors can address them, then they do have a chance to dethrone their competition.
[…] Lawrence has a new post up about how social software could dethrone the big guys. Sam references the photographic industry, and how the big guys at Kodak ended up being a niche […]
Sam,
I’d have to disagree with you on this on two points:
1. The analogy itself doesn’t make sense because replacing a camera (overnight) is far easier than ripping out a software system within the Fortune 1000 environment (months or years). We are talking about two completely different markets.
2. Social software is highly unlikely to dethrone the big guys because software is and will continue to be a platform game where scale matters.
More details below:
Social software will become a commodity like all almost all other software does over time. I don’t know exactly how this will happen, but there are plenty of examples of this happening in enterprise software: small companies come up with a cool idea, big guys catch on and either buy the companies or put them out of business (what happened to the companies that offered calendaring software after Microsoft Outlook became a calendaring solution?).
Microsoft will be a likely culprit in this. They have the power to commoditize software. SharePoint commoditized Enterprise Content Management and helped drive the consolidations that recently happened in that space (FileNet acquired by IBM, Open Text buying up several companies and so on).
What’s to stop Microsoft from adding more social features in the next release of SharePoint? I’m willing to bet that next version will include more and better social software features. Also, consider that SharePoint is now a billion dollar business as MS has recently announced. At the prices that they charge per license - that’s a lot of seats! Upgrades are easier than migrations to new software and SharePoint within organizations stores more and more data every day inside (lists, files, discussion forums, etc).
What’s different now that may favor your position? The increase in SaaS acceptance changes the equation a little bit because it changes the delivery model. At the end of the day though - it’s about reach (sales force, marketing budget, executive mindshare), resources, and scale. Microsoft will figure out SaaS before the current Fortune 1000 IT guard will retire to be replaced by the younger generation who would be more likely to consider “in-the-cloud” solutions for social software.
Let’s keep in mind that the big guys don’t jump on things until there is money to be made. Social networking is a small industry now. As the opportunity to make money in it grows, we can safely expect the big guys to pay a lot more attention.
At the end of the day, software business is a platform business and there is room only for so many platforms. The transition towards SaaS has made things even more complicated for smaller guys, because platform now includes the infrastructure needed to run the software in the cloud - another area where scale is an advantage.
If you ask me, the big guys (IBM, Microsoft, Oracle, Amazon, SalesForce.com and Google) aren’t going anywhere for a long time. Their businesses reach so wide that it will take a lot more than a really cool social software app to dethrone them.
Sam, there’s a flaw in the Kodak analogy: Canon and the new digital guys were essentially doing the same on a new technology platform. People-centric apps, social software, whatever we call it does not replace process-centric software.
As boring as process-centric software is, it is in the very core of many businesses. In fact when it really works well, we barely notice it, as it runs things for us, often automated. Then there are the ‘exceptions’ (what Sig callas Barely Repeatable Processes) that need ad-hoc solutions, and for those we use social software (if we do…) And of course that’s what we spend 80% of our time with … but it’s a fraction of the business volume.
So thinking that social software replace SAP and Oracle is an illusion.. we have the luxury of tinkering with it (social software), exactly because boring old ERP takes care of the core business:-)
Which is not to say that the enterprise incumbents won’t adopt people-centric concepts and software… but who am I telling this, for all I know one of those incumbents is now bundling Clearspace
I’m not sure that existing enterprise software and “social software” are competitors - I think they are complementary. As Zoli and Sig point out - the Easily-Repeatable Processes exist alongside the Barely-Repeatable ones. The hurdle is not the incumbent ERP systems, it’s the risk-averse and entrenched command-and-control mindsets …
@Zoli I’m sure there’s a bajillion flaws in my analogy. It’s really just represents what happens when you miss the boat.
Note I didn’t say anything about replacing SAP or Oracle. And I get that quantitative data and artifacts still need a home and a way to be managed. But as much as any of that needs to be socialized and part of the flow of business, social software will have an impact. Boring processes will be reshaped in social software. Quantitative resource planning will need to be actively discussed vs sit in a drawer. Repeatable processes can get better but there’s no place to evaluate them.
Regardless, I’m saying that social software will have a massive impact on the big guys. Most will be too slow to get it. They’ll all still be around but the dynamics will change.
[…] fundamentally disagreeing with Sam Lawrence. He’s a smart guy with a great marketing head. But on this post he’s over-reaching in my opinion. His basic argument says this: The big IT vendors aren’t taking social software […]
Large software vendors are slow to innovate and invest in “niche products” when they can just acquire a small, more nimble company later down the road who has aleady done the work and proven it out.
Case in point, in 2003 I worked for a small Georgia Tech startup that developed software for mobile & wireless application sync and push email. The company struggled. The product was ahead of the technology infrastructure to support it, as there were no “3G” networks. We took on a lot of venture capital, went through lay-offs but continued to soldier along. Over time the company gained traction with early adopter clients in Europe (where wireless infrastructure was more advanced). Finally the floodgates opened when Verizon Wireless upgraded most of their network and started white labeling our product. A few months later that company, Intellisync, was acquired by Nokia for $450 Million.
My point? Companies like Intellisync and Jive Software (and the forward thinking people behind them) are what drive innovation, not the SAP’s and Oracle’s of the world. Dethrone the big guys? I doubt it given the nature of enterprise software. However, you can’t help but wonder when you see how upstart FaceBook is dethroning (a very well-funded) MySpace. Sam may just have a valid argument.
The other thing I think of is that while the big boys look after the day-to-day (and even do a good job of it) processes, this is a hygiene factor nowadays - it’s the price of entry to the game. The winners will be those who harness the single largest untapped resource out there - their people. And THAT’S where social software comes in … not to replace but to augment.
[…] fascinating post as usual by Sam Lawrence How social software could dethrone the big guys: The next enterprise software […]
[…] Lawrence makes a case here on how social software vendors, including his own Jive Software, and SocialText, Atlassian among […]
I agree with you apart from the Canon activities : you forgot to mention that Cannon was already a very big player in the camera market. Canon ’simply’ adapted its cameras so that they could use memory cards instead of (Kodak) films.
good analogy though;
cheers
Sam,
Great post. If you think about it, a dozen years ago, Xerox used to own a big chunk of the Document Management world. They even had a Documentum-like product that helped pharmaceutical companies get new drug applications to and through the FDA faster, but somehow they missed the boat.
This happened partly because they thought that “document” means paper; partly because Adobe technologies interfered in regulated spaces; partly because they didn’t “get” relational databases, how to manage unstructured content….I could go on and on…
It’s interesting, though, that a company like EMC, which has publicly stated that it prefers JIVE over its own eRoom, doesn’t just buy JIVE or a company like JIVE unless social software just isn’t part of their business plan. Can a storage company like EMC do without it?
Virginia Backaitis
Read my ECM blog: http://www.BrilliantLeap.com/blog
[…] little too far, however marketers have no time for non-existent future facts. This short low budget blog post certainly seems to have got tongues wagging with both IBM and Microsoft employees debating on Sam […]
[…] is the Enterprise market in the mists of revolution where the giants will be overthrown by a new software model as suggest by Sam Lawrence? Of course the answer is complex and difficult to […]